Big banks that acquire little banks must fight tooth-and- nail to retain the acquired institution's small-business clientele, said an executive who has been in such a market battle.
Charles M. Petersen, director of small-business lending for Bank of Boston's Massachusetts region, oversaw the integration of a Fall River, Mass., community bank's business unit from 1993 through early 1995.
He said the experience taught him that acquirers need to worry about two things in a merger: winning over employees and the community, and fending off opportunistic competitors.
When it comes to dealing with employees, honesty is the best policy, Mr. Petersen said. He spent the first day at Multibank, the acquired bank, telling staff what he expected from them and what they could expect to happen.
"Don't tell them change isn't coming, because it's there," he said during a presentation at the American Banker Association's small-business lending conference.
Further, Bank of Boston provided training to show employees it wanted to help them bridge the cultural gap between the institutions, Mr. Petersen said. For instance, computer literacy was low at Multibank, while it was expected of Bank of Boston employees.
The bank reduced staffing levels through attrition, he said.
Bank of Boston also had to wage a public-relations war to overcome resentment against an outsider buying its way into town. This was exacerbated, Mr. Peterson admitted, by Bank of Boston providing Fall River with shoddy service after an earlier merger there.
So the bank made a show of having a presence on local boards, volunteering in local activities, and lending to a prominent business, Mr. Petersen said.
Mr. Petersen also had to contend with about 10 community banks anxious to capitalize on marketplace confusion.
"The competition was looking for opportunities to take business away from us," Mr. Petersen said.
One Fall River community banker confirmed that Bank of Boston has been a tough competitor, but said opportunities to nab business from it were plentiful.
"Bank of Boston is a fine bank," said Hemish Gravem, vice president of Citizens-Union Savings Bank, a $312 million-asset bank with six branches and headquarters in Fall River. "But because we have more flexibility we can be more nimble."
To shore up its position, Bank of Boston's staff met with all its most profitable customers, modified loan policies gradually instead of immediately, made an effort to quicken response time, and tried to find ways to creatively structure loans.
Mr. Petersen said Bank of Boston lost some small-business customers after the merger, but has stemmed the tide and recently started gaining.
"I heard a couple of the competitors were glad to see me go," he said. "In a perverse way that felt good."